How Does Fleet Management Impact Cost Savings?

When Bartley Stevenson began his construction business in 2010, he had a dump truck, a mini-excavator, a skid steer, a track loader and a dream. He wanted Milam Contracting in Columbia, Missouri, to become a full-service residential excavation company.

“What I wanted to get past was telling a customer, ‘We can do all facets of that job except for …,’” Stevenson said. “When you bring in the ‘except for,’ you bring in another contractor, and the other contractor builds a relationship with the customer, and pretty soon it’s their customer because they can do the whole job.”

To reach his goal, he needed to intelligently manage and grow his fleet. No construction company is the same, so there isn’t a one-size-fits-all formula for fleet management, but the basic strategies and tools for making smart decisions — Fleet Management 101 — hold true. 

Here is the story of how one contractor, who started with four machines and a dream, tackled the challenge.

What Is Fleet Management?

Construction fleet management is the process of acquiring and managing a company’s heavy equipment and vehicles, as well as the people who operate them. If that sounds like a very complex job with many variables, that’s because it is a very complex job with many variables.

The most obvious big-picture fleet decisions involve adding and subtracting equipment. That new excavator scent can be intoxicating — it is the sweet smell of a growing business — but heavy equipment is a major investment that deserves sober thought. 

Stevenson describes his fiscally responsible approach as “steak one night and hamburger the next … or maybe it’s more like steak one night and ramen noodles the next.” The point is, he doesn’t make snap decisions to buy based on a busy summer or to sell because of a slow winter. He stews on the topic year-round.

“I think about it every day,” Stevenson said. “Do we need more? Do we need to get rid of something? I lose sleep every night thinking about whether I should get more or reduce or change.”

Making smart choices about buying, selling, renting and off-renting equipment requires managing and measuring your company’s day-to-day work and expenses. That means monitoring the usage, performance, fuel consumption and maintenance of your fleet. It also means managing people, because those dump trucks don’t drive themselves — at least not yet. Equipment operators have to be hired, trained, kept compliant and deployed, and their safety must be protected at all costs. 

Stevenson also considers how his workers feel about the equipment and how that affects their feelings about working for him. His company has eight employees, so anyone leaving would be a 12.5% reduction of his workforce. 

“Employee retention is a major factor,” Stevenson said. “Me sitting in the office, I don’t care much about an air-ride heated seat in a piece of equipment, but if I can make it work on paper and it makes my employees happy, I’ll do it every time. Good people are so hard to find, train and keep. Having good, newer equipment plays a role in that.”

With all those insomnia-inducing daily challenges to consider, it’s easy to lose sight of the company you dreamt of when you started your business. For Stevenson, achieving his long-term goal of becoming a full-service residential excavation business meant upgrading the size of some of his equipment.

“We needed a bigger excavator for demolition, tree clearing, digging deeper sewers, breaking rocks,” Stevenson said. “Breaking rocks was probably the last thing we got to. The time to pull the trigger was when we would have a substantial job, and we’ve got a good history of a couple years of similar type work we’ve either had to subcontract out or rent equipment to do. When that happened, it was a good time to incorporate a larger excavator into our own fleet.”

That moment came about three years after starting Milam Contracting. Since then, he’s continued to gradually build his fleet. As his company has evolved, so have his methods for managing his fleet.

Managing your Fleet by Measuring Costs

When Milam Contracting began, Stevenson’s fleet management decisions relied on an alarming number of sentences that included the phrase “I think.” He didn’t have much to go on other than intuition.

“We had to make it up as we went along,” he said. “I was like, ‘Here is what I think we’re going to buy it for. Here’s what I think we’re going to sell it for. Here’s what I think it’s going to cost to run it. Here’s how much fuel I think it burns.’ There’s a phrase, ‘You can’t manage what you don’t measure.’ You have to start measuring it.”

After a few years, Stevenson created a spreadsheet so he could keep track of what his equipment really cost and what it earned. The spreadsheet included fixed costs like the monthly payment to the bank and insurance company, as well as variable costs such as fuel consumption, maintenance and depreciation. On the other side of the ledger was the money the machine generated per hour and the number of hours per year it was used. 

If the number on the left side was bigger, it was time to consider selling the piece of equipment at auction. If the number on the right side was bigger, it was time to consider buying or renting more, especially if the utilization rate was high. 

Modern fleet management technology, such as EquipmentShare’s T3 operating system, has removed a lot of the guesswork — and math homework — from the evaluation process. T3 shows contractors how much each piece of equipment is being used and keeps track of the equipment’s health and maintenance. 

“EquipmentShare has really helped small contractors like me manage their fleet,” Stevenson said. “A big part of it is the tracking through T3. The information gets pulled into the same platform so you can see the utilization of your owned equipment and rental equipment and so you know when you’re done with it. A lot of people don’t rent stuff soon enough because they don’t realize how overutilized their fleet is. Other times they have stuff on rent that they don’t return soon enough because the utilization is down.”

There isn’t one magic utilization rate that applies universally. Some contractors consider 1,000 hours per year a good benchmark, as it means the machine is being used about half the hours in a standard workday. Stevenson aims for 600 hours annually for his equipment. That makes sense for him, because on any given day, his company is doing one-day jobs on multiple sites. He has multiple machines that stay on their jobsites, rather than one that has to be loaded on a truck and moved from job to job during the day to rack up more hours of utilization. He is comfortable with his machines running fewer hours, because he knows they will last longer than busier machines. 

The plan is working. Stevenson noted he still uses the old faithful dump truck from his original four-machine lineup, but he has steadily built his fleet to a total of 30 machines. The business his late wife encouraged him to start has carved out a niche in mid-Missouri’s residential excavation market. Stevenson still has his share of sleepless hours in bed wondering about fleet management, but he knows he’s making data-driven decisions based on accurate information.

“I now have 10-plus years of history of measuring and tweaking my numbers,” Stevenson said. “By tracking all the costs, that’s how I can wake up and say, ‘OK, now it’s time to buy a new piece of equipment.’”

Take the guesswork out of fleet management with the help of EquipmentShare’s T3 technology. The T3 Fleet app gives you a bird’s-eye view of your entire fleet, including the health and use of each machine.